Tenant turnover is one of the biggest killers of profitability for a landlord. A month or two that a unit sits vacant can easily cost thousands of dollars in revenue, putting a serious dent in the year’s profits. While there’s no way to eliminate tenant turnover, you can take steps to minimize it.

Steps

Part 1

Choosing Tenants Wisely

1

Market your property appropriately. Make every effort to get the news of your vacant property to the community of people searching for rentals.[1] Although you should put a sign in front of the property, list with craigslist.org and the local newspaper, get creative.[2]

Most universities have their own listings of available rentals for faculty and staff. Make sure that your rental is among them.

Networking with rental agents and tenant matching services can pay dividends when it comes time to rent a vacant unit. These people can make the difference between a short turnaround and a long turnaround, so cultivate these relationships.

2

Ask smart questions at the showing. Even before you go through the formal screening process, you can weed out a lot of potential tenants at the outset.[3] Ask questions like:

When are you looking to move in? If a tenant answers with "next week," watch out. Find out why they need to move in so quickly. It could indicate a lack of planning on their part, because all tenants should give their landlords more than a week's notice before they move out.

How long do you want the lease to be? If you're looking for a long-term tenant (and if you're trying to reduce turnover time, you should be) you don't want to sign a lease with a tenant who only wants to stay for three months.

Why are you moving? You will find out about evictions and foreclosures when you do your background check, so pay more attention to answers that reflect extremely negatively on their current landlord. It could indicate that the tenants have a quarrelsome disposition.

3

Screen possible tenants for red-flags. While you don’t want to be so choosy that you drive away good business, you need to make sure that you aren’t setting yourself up for a surprise vacancy in the near future. Conduct a background check and ask for references.[4]

Make sure that your tenants can afford the property. A good rule of thumb to abide by is ensuring your tenants make at least three times the monthly rent in income.

Make sure they haven’t trashed other landlords’ properties, and make sure they haven’t left without notice in the recent past.

4

Be fair. You don't want to run afoul of fair housing laws, so be sure to treat all prospective tenants evenhandedly. If your gut instinct might lead you to do a stringent background check on one applicant, you should conduct the same type of background check for all of your applicants. Gut instincts are often reflective of our unconscious prejudices.[5]

Part 2

Keeping your Current Tenants Happy

1

Keep your property in good shape. This is the single biggest grievance that tenants have with landlords, and it’s a very simple problem to fix.[6] No one wants to live in a dump. It doesn’t matter how modest the property is, the property can be kept in good repair. In fact, the more modest the property, the easier it should be to maintain.

A lot of landlords think that tenants should care for your rental property as they would their own property. Don’t count on it. It’s not their responsibility, and the property owner is the one who reaps the economic advantage in the relationship.

2

Make repairs promptly. On a related note, when a tenant needs something repaired, get it done right away.[7][8] The repair process is inherently slower for a renter than an owner. The renter has to notify the landlord, wait for the landlord to respond, wait for the landlord to get around to finding a repair service, and then wait for the repairmen to schedule a time to come and repair the problem. Under the best of circumstances, that can take a couple of days.

As a landlord, the least you can do is to get in touch with the renter about the repair within a day. Even if the problem doesn’t get solved right away, at least the tenant will know you’re working on it.

Repairmen who are slovenly and incompetent create a bad impression on your tenant, because they make it seem like you don’t care enough about them to hire competent people. On top of everything, botched repair jobs often end up costing you twice as much as the sticker price, because you have to pay to repair the repair.

3

Check in with the tenants. You should check in with your tenants regularly. You don’t have to be their best friend, but you need to be aware of their general concerns.[9]

After a repair has been completed, call your tenants and make sure it was completed to their satisfaction. Do the same for maintenance services like landscapers and pest control. This is true regardless of whether you own one unit or one hundred units.

It is especially important to check in if you use a property management service. While you might use a property manager because you want to save time, if you’re trying to minimize tenant turnover, you’ll make the time to make sure that your property manager is doing their job.

4

Go the extra mile. A tenant enters into a long term relationship with a landlord when they sign a lease, and it’s usually a relationship that makes the landlord a significant amount of money. In most long term customer relationships, the party that gets the monetary benefits will make special efforts to keep the other party happy.[10]

Apply this lesson to your landlord-tenant relationships. Send your tenants a bottle of wine on their birthday or a rebate around the holiday season. Incentivize them to give you rental referrals.

Part 3

Minimizing Turnover Time in a Vacant Unit

1

Make your tenants give you appropriate notice. In order to minimize the turnover time of a vacant unit, you need to take appropriate steps before it becomes vacant. Since you don't want to scramble to make repairs on an already vacant unit, make sure that your leases specify the amount of notice a tenant has to give you before they move out.

Thirty days is a customary time period for notice, 60 days is even better. Whatever period you choose, make sure that you get it in writing, and that you don’t let leases lapse.

2

Make a pre-vacancy inspection. Make an inspection of the property no less than three weeks before it becomes vacant. This helps you and your outgoing tenants. You can let them know what repairs they need to make in order to get their deposit back, and you can begin to schedule repairs that fall outside of that scope.

Always anticipate repainting, but check to make sure windows are in good order, plumbing and fixtures are in repair, and the appliances are functioning properly. Also make sure to pay special attention to areas, like crawlspaces and attics, where tenants are unlikely to venture.

3

Try to rent out the unit before the old tenants have moved out. This is the most straightforward way to reduce turnover time. You’ll need to market aggressively to accomplish this, and it never hurts to enlist your tenants on your behalf.[11]

4

Get to work right away. You should aim to get the property ready to rent within the first week of vacancy. Time is money. Even if you are actively showing the property while you are making repairs, a property under renovation is less attractive than one which is completed, and no one will move into a construction site even if they want to rent the finished property.[12]

Depending on how many properties you own, it might behoove you to employ a small maintenance crew yourself for painting and small repairs.

Part 4

Catering to the New Set of Renters

1

Keep your property updated. This goes beyond maintenance, and speaks to property improvements. The farther your property falls out of step with current trends, the less rent you will be able to command in the future.[13]

You don’t have to change a shack into a mansion to accomplish this goal. Strive to make your older property comparable to what a renter could expect from a new property in the same class. So if you are renting a starter-home type property that is 20 years old, keep it comparable to what a renter could find in a new starter home.

2

Pay attention to infrastructural projects and adapt accordingly. Infrastructure can change the character of a neighborhood in a more permanent way than nearly anything else. Airports, bridges, stadiums, railroads—these types of projects can change the rental market in profound ways both good and bad. The good news is, they rarely happen overnight. Understand what’s coming and adapt to predictable changes.[14]

For example, if a nearby college is undergoing a major expansion close to one of your properties, you can anticipate a larger proportion of young college renters. Make the change work to your advantage. Rent out rooms and sign leases to individual renters rather than a lease for the entire house. You can make up for the extra trouble by charging a slightly higher rent per tenant.

3

Compensate for market weaknesses. If you’re staying abreast of current trends and upcoming infrastructure projects, you might become aware of market demands that make your property less desirable.[15] With a little ingenuity, you can compensate for these.

For example, you might own a suburban property that you rent. If demand for urban units spikes and demand for suburban units craters, see what you can do to bring a little urban convenience to your suburban property. Try to throw in a gym membership, a Netflix subscription, trash pickup, or a utilities package along with the rent.